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Power Savers: Energy Efficiency in the Residential Sector
Posted By @ Jan 27th 2010 12:41pm In: Charleston SC Commercial Real Estate

According to the U.S. Department of Energy’s 2008 Annual Energy Review, the residential real estate sector accounts for roughly a fifth (22 percent) of all energy consumption in the country.This considerable share of all energy consumption has led lawmakers to propose policies to improve energy efficiency in homes.At the same time, homeowners and home buyers are showing a greater preference towards energy ef.ciency for reasons varying from a desire to become more environmentally conscientious to cutting down on their monthly energy bills.When formulating policy, however,there are several factors to consider. 

Older vs. newer homes 
According to the De­partment of Energy’s 2005 Residential Energy Consumption Survey, homes constructed before 1970 consume roughly one and a half times what newer homes consume,on a per square foot basis.

Cost variations 
Energy costs for the typical household can vary widely, ac­cording to the DOE’s 2005 Residential Energy Consumption Survey. In the North­east, the typical yearly energy bill was $2,319, compared to $1,491 in the West. Federal legislation regarding residential energy policy should take into account these regional variations when it comes to energy costs.

Marketing homes to energy-conscious buyers
For homeowners looking to sell their properties (as well as the real estate professionals who assist them), they may want to take into account the fact that current home buyers are placing greater significance on homes’ heating and cooling costs as well as energy efficient appliances and lighting in their home buy­ing decisions.According to NAR’s 2009 Profile of Home Buyers and Sellers, 88 percent of recent home purchasers indicated a home’s heating and cooling costs were at least somewhat impor­tant in their home-buying decision. In addition, roughly 70 percent said that energy-efficient appliances and efficient use of lighting was important. In fact, reducing energy costs through energy ef.ciency appears to take priority over other energy or environmentally friendly home features such as “Landscaping for energy conservation” and “Environmen­tally friendly community features” which about half of home buyers said were important to their buying decisions. Homeowners may need to consider improving their homes or retrofitting in order for their current properties to be more energy efficient.A few things need to be considered such as the length of time home owners plans to own their homes (the median, according to NAR’s 2009 Pro.le of Home Buyers and Sellers, is about 7 years) and the cost of the upgrades.There are a few ways that homeowners can benefit from upgrades. First, homeowners will save on energy costs. Some projects have longer payback periods (i.e., the amount of time that it takes to recoup the cost of the energy efficient upgrade through reduced energy usage), while others have a universally low payback period like programmable thermostats which are relatively cheap and easy to install.The energy savings from a programmable thermostat can be recouped in as little as a year. However, some projects may be more expensive to undertake and the payback period can vary greatly depending on the region where the home is located. For example, sealing air ducts or replacing windows may be much more cost effective with a shorter payback in regions where heating costs are greater. Second, since home buyers are increasingly aware of energy efficiency, certain upgrades may increase a home’s resale value. Finally, there is the “peace-of-mind” benefit that homeown­ers may feel by being friendlier to the environment.

Potential Impact
Federal policy options should take into consideration a variety of factors like the variations in region, age of homes, and mix of homeowners when creating new laws. Likewise home buyers and sellers should be aware of such factors when making upgrades to their existing homes or when purchasing a home.

For more information about home buyers’ views on home characteristics
– including energy-related issues – visit to access the latest
2009 NAR Pro.le of Home Buyers and Sellers. NAR members can down­load the full report in PDF format at no cost.Those interested in more complete data on the Department of Energy’s tracking of energy consumption and cost should visit

by Arun Barman, Research Economist


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